On June 23, the domestic commodity market collectively weakened, with the cotton sector under particular pressure. The main Zhengzhou Cotton contract broke below the key psychological threshold of 16,000 yuan per ton during the session, closing at 15,905 yuan per ton, down 105 yuan for the day. This loss of a critical psychological level signals that short-term market confidence has hit rock bottom. Bearish sentiment intensified on the board, with long holders facing significant floating loss pressure.
The spot market weakened in tandem, without any bottom-fishing buying triggered by the futures decline. The domestic cotton 3128B price index stood at 17,631 yuan per ton, down only 1 yuan, but with thin trading volumes. Downstream textile enterprises have seen disappointing order recovery, with finished product inventories piling up. Procurement strategies have turned conservative, limited to small batches on an as-needed basis. The market lacks willingness for bulk stockpiling, and the spot side's price support has all but vanished.
Multiple Bearish Factors Resonate in International Markets
On the international front, bearish factors were released in a concentrated manner. The main ICE cotton contract also closed lower at 78.59 cents per pound, a decline of 1.03%. US cotton planting progress is nearing completion, and market expectations for the new season's production have turned looser, suppressing upside potential for cotton prices from the supply side. Meanwhile, the US dollar index continued to strengthen, weighing on valuations of all dollar-denominated commodities. Combined with systemic drag from collective weakness in global energy, grains, and financial sectors, capital continued to flow out of the cotton market.
The external decline quickly transmitted to the domestic imported cotton market. On June 24, offers at main ports fell slightly across the board. Converted at the 1% tariff rate, the International Cotton Price Index SM grade was quoted at 14,961 yuan per ton, and the M grade at 14,627 yuan per ton. Notably, the decline in the mid-grade M cotton was larger than that in the high-grade SM cotton, suggesting that downstream enterprises prefer sourcing more cost-effective materials, a side reflection of consumption downgrade pressures. The domestic-international cotton price spread narrowed, yet the attractiveness of imported cotton purchases did not improve.
Industrial Impact: A Chain Reaction from Upstream to Downstream
The breakdown in cotton prices has significantly different impacts on various links of the chain. For upstream ginners and growers, current prices are approaching or even falling below planting costs in some regions, severely compressing profit margins. Inventory holders face substantial mark-to-market loss risks, with some companies already considering hedging or actively destocking.
Midstream traders face an even more difficult situation. Widening volatility in the spot-futures spread has made operations in point-price and basis trading much more challenging. Market liquidity has decreased, making it difficult for traders to quickly liquidate positions, increasing capital turnover pressure.
While downstream textile enterprises benefit from lower raw material costs, the real bottleneck remains insufficient end-user orders. The falling cotton prices have not spurred concentrated buying; instead, they have reinforced a 'wait and see' attitude, with buyers holding cash and waiting for even lower prices. This slows down the pace of destocking across the supply chain, creating a negative feedback loop.